Risk assessment

Growth has found its level

The first quarter of 2017 confirmed the growth trend. While household consumption (+0.1% from the fourth quarter of 2016) was dampened by exceptionally weak spending on energy (-3.3%), it is set to recover in the second half, buoyed by falling unemployment (expected at 9.3% at the end of 2017), a rise in real wages (+0.8% in 2017) and access to cheap consumer credit. These low levels will also benefit to residential investment, which should accelerate. The outlook here looks better: the number of construction permits issued in 2016 grew by over 10%. Meanwhile, business opinion surveys point to a good level of confidence in the economy. The renewal and modernisation of existing production apparatus are set to be the main reason for investment in 2017. However, company debt is not forecast to grow in 2017, and the Credit Tax for Competitiveness and Employment (CICE) and low energy costs enabled businesses to grow their margins by around 31.8% in 2016. The 2017 draft finance bill includes new business-friendly measures worth €5bn (0.2% of GDP), including a cut in corporation tax to 28% for small and medium-sized firms. Bankruptcies are therefore predicted to fall slightly in 2017 (-3.2% versus -2.8% in 2016) and the growth in start-ups since 1 January 2014 (+12% average annual growth since 2014) will continue. Nonetheless, some sectors will not benefit from this drop in bankruptcies: textile-clothing, hotel and catering, and transportation. While hotel and catering and transportation are impacted by the growing collaborative economy, which is forcing traditional players to adapt, clothing is running at over-capacity as a result of the growth of online shopping. According to Fevad, they advanced by 14% year-on-year in the first quarter of 2017. 17% of clothing purchases are now made online.

Despite the fall in oil prices no longer having any effect on prices generally, inflation should remain low because of the limited pick-up in domestic demand and persistent over-capacity (1%).

Foreign trade will continue to hamper growth

While France has become more price-competitive compared with its neighbours (low wage rises and state support via the responsibility pact and the CICE (see above)), French exports seem set to stagnate in 2017. This beneficial effect will be offset by a slowdown in business growth among France's main trading partners. For example, the UK (7% of exports) will be affected by a fall in investment of companies (-0.3% in the first quarter of 2017 quarter-on-quarter)lié aux incertitudes créées par le referendum du 23 juin 2016. Du côté des importations, si le prix du baril de pétrole demeurera faible en 2017, il progresserait néanmoins. In respect of imports, while the price of a barrel of oil will remain low in 2017, it is nonetheless predicted to rise by 25% to 55 dollars on average. This will add to the price of imports, harming France's balance of trade.

The balance of services will no longer be negatively impacted by the fall in tourism receipts. The sector accounts for 7.5% of GDP, of which 2.5 points are attributable to foreign tourists. The effects of the terrorist attacks in 2015 and 2016 are dissipating. Hotel occupancy rose by 4.5% in the first quarter of 2017 year-on-year, thereby reaching an unprecedented level for the first quarter. For the Greater Paris area alone, the rate improved by 12.8%.

A new pro-European president

Presidential and legislative elections were held in France between April and June 2017. They led to the socially liberal candidate Emmanuel Macron being elected President. His party, La République En Marche, won an absolute majority of seats in the national assembly. His programme notably includes reforms to make the labour market more flexible and reduce the burden on companies. Another key issue included in it was the strengthening of the European project.

Last update : June 2017

Payment

Among methods of payment, the bank card is now the instrument used most inFrance, replacing cheques, which are nonetheless still widely used.

For cheques remaining unpaid over 30 days from the date they were first presented for payment, the beneficiary may immediately obtain an enforcement order (without need of further procedural act or cost) based on a certificate of non-payment provided by his banker after a second unsuccessful presentation of the cheque for payment and where the debtor has not provided proof of payment within 15 days of formal notice to pay served by a bailiff (article L 131-73 of the monetary and financial code).

Bills of exchange, a much less frequently used mode of payment than cheques, have been in virtually constant decline in terms of number of operations with volume remaining essentially steady in value terms.

Bills of exchange are attractive for companies insofar as they may be discounted or transferred, therefore providing a valuable source of short-term financing. Moreover, they allow creditors to bring legal recourse in respect of “exchange law” (droit cambiaire) and are particularly suitable for instalment payments.

In value terms, however, cheques and transfers still represent most script payment transactions.

Bank transfers can be made withinFranceor internationally via the SWIFT electronic network used in French banking circles, which offers a reliable platform for timely payment subject to mutual trust and confidence between suppliers and their customers.

The directive 2007/64/EC (in force since 1st November 2009) on “payment services in the internalEuropean market” sets the legal basis for the creation of a single area for payments in Euros (SEPA), in order to harmonize the rules applicable to the different types of payment (transfers, direct debits, payment cards).

Debt collection

Since the “New Economic Regulations Act” of 15 May 2001, commercial debts automatically bear interest from the day after the due date shown on the invoice or specified in the commercial contract. Late payment penalties and fixed indemnity must be stated on the invoices under penalty of fine.

Unless otherwise stated in the general sales conditions or agreed between the parties, the payment period is set at thirty days from the date of receipt of goods or performance of the service requested.

These payment periods can be shortened if the sale relates to perishable goods, livestock or alcohol and, as a general rule, begin on the day of delivery; they can be extended if the sale relates to products to be shipped abroad.

Some sectors, such as transport, have payment periods subject to exceptions to ordinary law. These payment periods start as of the day the invoice is issued.

The applicable payment periods for the relevant sector in the contract of sale should therefore be checked.

Likewise, the interest rate and conditions of application must be stipulated in the contract and stated on the invoice – failing that, the applicable rate will be the interest rate applied by the European Central Bank in its most recent refinancing operations, raised by ten percentage points as of 1st January 2009.

For the first half of the year in question, the rate applicable is that in force on 1st January and for the second half year in question, the rate applicable is that in force on 1st July.

The Parties can agree on a lower rate, but this cannot be less than the legal interest rate.

The late payment penalties are calculated using the invoice total including taxes as of the morning after the due date; the penalties are not subject to VAT. They are payable without any requirement to issue a formal notice to the debtor.

From 1st January2013, a professional in default of payment is legally liable to its creditor for a fee for collection costs, set to 40 Euros ( should be stipulated in the General Terms and Conditions of Sale).

Failure to pay by the due date may also subject the professional to a civil penalty of up to €75,000 for a natural person or €375,000 for a corporate entity.

Serving the debtor with formal notice to pay the principal claim and contractual or legal interest but also suggesting the possibility of reaching an amicable agreement for the settlement of the debt, nonetheless remains a precondition to initiating any legal action.

Evidence now needs to be shown in the context of the actions undertaken that there was an attempt to reach an agreement with the debtor in question.

This obligation arises from the amended wording of Article 56 of the French Code of Civil Procedure which requires, as of 11 March 2015, an attempt to reach an amicable settlement before the initiation of legal proceedings under penalty of the nullity of the summons.

The only exceptions to this amicable agreement requirement are requests based on compliance with public policy or those justified on the grounds of urgency.

Since 19 June 2008, the current limitation period in civil and commercial matters, was reduced to 5 years and the limitation starts “from the day when the right holder knew or should have known the facts to allow him to apply for such right”.

Where a debt claim results from a contractual undertaking and is both liquid and undisputable, creditors may use the injunction-to-pay procedure (injonction de payer), a flexible system based on the use of pre-printed forms not requiring applicants to argue their case before the court of civil instance (tribunal d’instance) or competent commercial court – the court having jurisdiction in the district where the debtor's registered offices are located.

Via that procedure, creditors can rapidly obtain a court order to be served subsequently by a bailiff.

The defendant has one month to dispute the case.

A fast track procedure (référé-provision) provides creditors with a rapid means of debt collection, even in routine cases lacking any real urgency, provided the claims are not subject to substantive dispute; in such cases, the judge can grant a provisional payment in favour of the applicant that can represent up to 100 per cent of the claim.

However, this fast track procedure requires the presence of an attorney to represent the creditor in court.

If a claim proves to be litigious, the judge competent to rule on special urgency (juge des référés) evaluates whether the claim is well founded. As appropriate, the judge may then declare himself incompetent and, based on his assessment of the apparent validity of the case, invite the plaintiff to seek a ruling on the substance of the case through the formal court process.

Formal procedures of this kind permit having the validity of a claim recognized by the court, a relatively lengthy process lasting about a year or more owing to the emphasis placed on theadversarial natureof proceedings and the numerous phases involved in the French procedural system: submission of supporting case documents, written submissions by the litigants, examination of the types of evidence, various recesses for deliberations, and at last, the hearing for oral pleadings (audience de plaidoirie).

If justified by a claim’s size and the uncertain solvency of the debtor, legal action may include a petition to obtain an attachment order on available assets and thereby protect the plaintiff's interests pending completion of the proceedings and enforcement of the court's final judgment.